Software to automate invoice processing has been available for a long time, but many councils persist with manual systems. There are reasons for this including the continued use of paper by suppliers. This article explains how Enfield Council overcame the difficulty of handling all shapes and sizes of invoices by automating processes.
With a population of 312,466* across the borough of Enfield, and with this number increasing at a rate higher than both the London and national average, the administrative functions across the council provide the backbone for delivering their wide range of services to their communities. The Accounts Payable Team administers the council’s creditors function which includes the processing of around 120,000 invoices per annum. However, a need to reduce costs whilst at the same time enhance their work processes, led to a review of the administrative processes used within their accounts payable area and during 2010-11 a number of significant changes were made.
The business drivers
The business case for implementing OCR/scanning was to reduce the number of invoices to be physically handled which will therefore reduce the invoice processing costs and thus enable some savings to be realised.
Previously, the management of invoices had been handled at the departmental level, resulting in a lack of transparency, some backlog, and difficulty in tracing the status of individual invoices at any one time. As Jeanne Edeam, Accounts Payable Manager, explains, ‘Our invoices were arriving at the council in a myriad of formats, making it challenging to track and identify correct invoices against correct purchase orders. This also led to a difficulty in managing cash flow forecasts and dealing with supplier enquiries accurately’.
Another primary business driver was to enable the council to move towards electronic invoicing, making use of a new eMarketplace system they had recently adopted. However, in moving towards the eMarketplace they found that a high number of suppliers were not yet in a position to work electronically, and therefore the council still needed a way to handle paper invoices.
A third, and highly critical motivation for the project, was to improve the ease at which they collate their financial reporting data. Closing their End of Year Accounts had previously been a labour intensive process due to the disparate and paper intensive nature of their work, so they were looking for a way in which to reduce the administration time needed for this. As a council, they are also required to provide all accounting information relating to each of their grants, breaking their spend down to the penny. On top of this, they are also the subject of government audits where they are asked to supply copies of invoices quickly – another process that was difficult without easy access to electronic data.
Introducing an outsourced scanning service
As a result of this review Enfield Council identified the need for a scanning process – one that would provide a central post box, capture their paper based invoices daily and convert those arriving electronically into a standard format. They also needed the images in a format that could be added directly to their SAP system.
So, firstly the council centralised their payments team, taking the responsibility away from individual departments. Discovering that the high number of incoming invoices would be too difficult to scan and convert in house, they engaged Capital Capture to deliver a fully managed invoice processing service handled at Capital Capture’s offsite scanning bureau.
All invoices are now sent to a PO Box number, arriving directly at Capital Capture’s secure premises on a daily basis. They are scanned, quality checked, and the images are provided back to the council via SFTP transfer. Given the flexibility of using an outsourced bureau, any variances in daily volumes are managed without any changes to the agreed SLAs.
To launch this, the council standardised the format of their invoices, making it easier for key data fields to be extracted from the image, ready for input into SAP. All these changes were communicated both to the council’s internal stakeholders and also to all their suppliers via a structured communications strategy.
Since adopting this centralised invoice processing strategy, supported by a high end capture and conversion process, the council now has complete transparency across their entire accounts payable area whilst also providing visibility to all stakeholders across the organisation. Jeanne Edeam explains further, ‘We have been able to make significant savings, improved payment terms to our customers and are able to provide same day turnaround on many of our invoice queries.
‘Our turnaround time for paying invoices improved from 93% to 97% for payments within 30 days, and 10 day payment terms turnaround improved significantly from 40% to 82% .
This new process also means that instead of having to chase around the business to identify the status of invoices, or even to find missing invoices, the council’s workbench software now provides a coding system whereby they know the status of each invoice at any given time. Through this automated workflow they are also able to automate payments where there is a 3-way match between the purchase orders; goods receipt note and the invoice value.
Introducing wider improvements
Having now eliminated their backlog, Enfield has seen a significant improvement in their payment terms and an improvement in their ability to manage their cash flow. In fact, in a recent survey to suppliers they found more than 50% had noticed an improvement in the council’s payment processes in terms of speed and reliability.
Perhaps most importantly, by introducing a more efficient and more cost effective electronic invoicing system, the Payments Team are now able to take a pro-active approach to their work. Now having the time to look across their other financial processes and identify areas for improvement, for example, areas where procurement could be handled more efficiently, this centralised capture process has not only provided direct enhancements to the council’s invoice processing but also provided a sustainable way to generate further efficiencies across the organisation.